Under-coding won't save you — it could trigger a payer audit

Most medical practices believe their coding is “good enough.” Claims are going out, payments are coming in, and with money in the bank, most practitioners don't give coding the proper audits needed to make sure they are maximizing what's owed to them. On the surface, everything looks fine.

Self-audits are sometimes ignored if the practice staff is overworked or under trained. But understand that if you are not regularly auditing your coding, you are making decisions based on incomplete and often inaccurate information. "This is the way we've always done it" isn't good enough anymore, and that way of thinking has a direct impact on revenue, compliance and long-term stability.

Coding audits are not just about protecting yourself. They are about understanding what is really happening inside your revenue cycle.

The over-under coding debate

Coding errors rarely show up as a single, obvious problem. They show up as patterns.

A provider may think they are playing it safe by under-coding. This can be just as dangerous as over-coding, causing not just denials, but an official payer audit. Self-audits are the best way to prevent this.

Under-coding alone can reduce revenue significantly without ever triggering a denial. That is what makes it dangerous. The payer pays the claim but pays less than they should. Since payers take notice of questionable patterns, seeing the same under-coding over and over could trigger an audit.

On the other side, over-coding or unsupported coding creates compliance exposure. That risk does not show up until a payer audit, "recoupments" request or worse.

Without a structured audit process, you are placing dangerous bets somewhere between these two extremes without realizing it.

Coding accuracy drives more than just reimbursement

It is easy to think of coding as a billing function. In reality, it is a financial control system.

Coding determines how services are translated into revenue. It affects your net collection rate, your denial rate and your overall financial predictability.

If coding is inconsistent, your numbers are inconsistent. That makes it difficult to trust your reports, evaluate provider performance, or make informed business decisions.

Practices that take coding seriously tend to have something in common. Their numbers make sense. Trends are easier to identify. Problems are caught earlier.

That does not happen by accident. It happens through regular review and accountability.

Strong coding audits need to be pretty on the inside

A low-effort audit doesn't do you any favors. While a quick chart review or a high-level summary can be helpful, A meaningful coding audit goes far beyond that.

At a minimum, it should include a review of a representative sample of encounters across providers and services. Each chart should be evaluated line by line to confirm that the codes billed match the documentation.

The audit should assess three core areas.

• Code selection
  • Are the correct CPT, ICD-10 and HCPCS codes being used based on what is documented?
• Documentation support
  • Does the medical record fully support the level of service and procedures billed?
• Modifier usage
  • Are modifiers being used correctly and only when appropriate
  • A high-quality audit also looks for patterns, not just individual errors.
  • It identifies whether a provider tends to under-code, whether certain services are consistently mis-billed or whether documentation habits are creating risk.

While accurate data is most important, the findings should be translated into something practical. Providers and staff need clear, simple feedback on what to change and why it matters.

Audits protect against scrutiny

Regular coding audits are one of the most effective ways to get ahead of issues before they become expensive problems.

When claims are coded correctly the first time, they move through the system faster and with fewer interruptions. Meaning, reduced denials and more money for the practice's bottom line!

Regular self-audits don't guarantee you won't be audited by a payer, but they do protect against compliance risk by identifying unsupported coding and documentation gaps. This is especially important as payer scrutiny continues to increase.

They improve consistency across providers. When everyone is coding based on the same standards, your data become more reliable.

They uncover missed revenue opportunities. It is common for audits to reveal services that were performed but not billed correctly or at all.

In short, audits bring visibility. And once you can see the problem, you can fix it.

Visual representation: Charts & graphs!

One of the biggest advantages of a structured audit process is the ability to create meaningful performance metrics.

Too many practices track high-level financial numbers but have no insight into what is driving them. Coding audits help connect the dots.

Where to look? A few practical metrics to focus on include coding accuracy rate, denial rate related to coding issues and documentation support rate.

Coding accuracy rate tells you how often codes are selected correctly based on documentation. This is a direct measure of performance.

Denial rate tied to coding helps isolate how much rework is being created by preventable errors.

Documentation support rate highlights whether providers are fully capturing the work they are doing.

You do not need a complex system to track these. Many practices start with simple reports and a basic dashboard. Many Billing/EHR systems have dashboards or tools to help provide a visual. Review the data regularly and use it to guide conversations with providers and staff.

Over time, these metrics become a powerful tool. They help you measure improvement, identify trends and hold the team accountable in a constructive way.

With the advent of AI, denials are on the rise again. You might consider using software with built-in AI coding review tools. Or use a 3rd party RCM company.

Making audits part of the routine

While it's beneficial to periodically "spot check," it's better to treat audits as part of an ongoing process, not a one-time event.

An initial audit establishes a baseline. It shows where things stand today and where the biggest gaps are.

From there, periodic audits can be scheduled based on volume, risk and available resources. Some practices review a small sample monthly. Others perform more comprehensive reviews quarterly.

Consistency is key here.

Equally important is follow-through. Audit findings should lead to education, process adjustments and clear expectations. Without that step, the same issues tend to repeat.

When audits are done well, they are not punitive. They are a tool for improvement. Providers generally respond well when feedback is specific, fair and tied to real outcomes.

Don't feel like you have the skill set? Many RCM companies offer coding review as part of their suite of services.

Best practices and OIG recommendations

Most small practices do not know how often they should audit and tend to get overwhelmed thinking about it.

Start determining right now what your best practices should be in terms of frequency. Official OIG recommendation for bare minimum is one formal compliance/self-audit per year. If you do no more than that, you're asking for a lot more work and effort at the end of that annual audit. It's a good idea to do periodic "mini-audits” that just focus on things like:

• 5-10 charts per provider
• Focus on top CPT/E/M codes
• Review Modifiers and related documentation

E/M coding is a big audit topic. Since the 2021 change shifting focus to Medical Decision Making (MDM) or Total Time, E/M coding has become more reliant on documenting clinical thought processes. While these changes aimed to reduce administrative burden, many providers misapply these new rules.

Practicing consistent audits helps iron out these errors.

Office managers: Don't sleep on coding review

Want to be the Practice Hero? Be confident in your numbers. Knowing the underlying processes will provide you with that confidence. Coding sits at the center of those processes. It connects clinical work to financial results.

Ignoring it increases your risk and makes the big picture harder to understand. Regular coding audits provide clarity. They help you protect revenue, reduce risk, and create a more predictable operation.

As payer rules continue to evolve, it can sometimes feel like the game "whack-a-mole", but when you have a handle on coding, you are in control. That kind of control is not optional. It is essential.

If you care about your numbers, you have to care about your coding.

Adam Phillips is CEO of American Business Systems.